These days, you can buy virtually anything online. So why is it
still hard to buy insurance over the Web?

Insurance companies are stepping gingerly, if at all, into
e-commerce waters. And while Web sites that provide quotes to
potential customers are fairly common, insurance companies'
offerings are spotty and actual sales over the Web are scarce.

One obstacle to selling insurance over the Web is state
legislation. According to the National Association of Independent
Insurers, 30 states have residency laws that require insurance
companies to be licensed in the state and have agents residing in
the state in order to have policies approved for sale. The
residency laws make selling insurance over the Web a no-win
proposition for insurers because they must still support a network
of local agencies. Because of this mandate, companies often see the
Web as an added expense, one that does nothing to reduce the cost
of selling insurance and whose revenue potential is still
unproven.

The second roadblock is the nature of the insurance business
itself, which requires much human interaction. Life and health
insurance policies often require physical examinations; property
and auto insurance often requires inspection of the goods before a
policy is written. The virtual world of the Web simply can't
provide an alternative to this need for real-world
communication.

Perhaps the greatest obstacle is simple inertia. The insurance
industry is a jungle of paperwork with a need for signatures and
counter-signatures, and for every form to be filled out in
triplicate. "In this industry, 18 cents on the dollar is spent
on administrative costs," says Mitch Bishop, vice president of
marketing at ChannelPoint, a company that plans to change this
scenario by selling small group health insurance policies on the
Web.

Providing a model that may help change the way insurance
companies operate, ChannelPoint's business is aimed at cutting
those administrative costs, giving entrepreneurs all the
efficiencies of buying health insurance over the Web with none of
its drawbacks. Insurance companies buy ChannelPoint's software
and give it to their brokers, who can write and submit applications
for online customers, completing in hours what used to take
weeks.

ChannelPoint's approach still requires completion of
electronic "paperwork," to keep it in line with state
licensing and residency requirements. Entrepreneurs benefit by
getting covered more quickly. And, in theory, insurance companies
will be able to pass on administrative savings to their
customers--although the concept is still new and no positive
effects on insurance rates have yet been documented.

Claire Tristram is a business and technology writer in San
Jose, California.

Personal Policies

Life insurance as a business asset.

Need money fast? There's an easy way for entrepreneurs to
feed their cash flow needs: By borrowing on a life insurance
policy.

"There's no reason not to look at your personal life
insurance policy as a business asset," says David Schulman,
chartered life underwriter and chartered financial counselor for
Mass Mutual in South Florida. "Interest rates from borrowing
on your life insurance policy will be lower than a rate from your
bank." The process can be quicker, too.

If you're the sole proprietor of your business, a life
insurance policy will make obtaining credit from any source easier.
"Typically, creditors will be interested in making sure your
debts will be covered in case something happens to you," says
Schulman. You'll also accumulate a strategic asset that you can
borrow from, or against, if your business experiences a cash flow
problem later.